Dallas Accused of Violating Federal Housing Rules Again, as Investigations Keep Coming

Federal money is tempting, but it isn't free. What money is?EXPAND
Federal money is tempting, but it isn't free. What money is?
Szaaman

Dallas City Hall is winding itself tighter into a legal snare on federal housing issues. Two shoes dropped before the holiday. Pretty bad shoes.

The city attorney informed the City Council that it has been accused of jerking around an existing low-income housing project near the Galleria Mall in North Dallas, trying to get it to move away. This is after and in spite of countless closed-door lawyer briefings warning the council that picking on federally subsidized low-income housing — especially trying to steer it away from affluent areas — is what the feds call “racial segregation.”

Remember, this is about hundreds of millions of federal dollars that the city takes from the feds. The city doesn’t have to take that money. To get it, they have to apply. They have to compete for it, in fact. So if it doesn’t want to get into trouble with federal housing law, all the city has to do is not apply for, not compete for and not take federal housing money.

Just don’t take the money. But if you do take the money, if you sign a contract promising to obey federal law, if you swear every year that you’re still obeying the law, and if you openly and flagrantly violate the law, then you are an idiot.

The jury is out on this one. All we know is that a complaint has been filed. Nobody’s guilty, nobody’s an idiot yet. But it looks bad, idiot-wise.

Dallas City Attorney Larry Casto sent the council a letter in early December (copy below) telling them the U.S. Department of Housing and Urban Development (HUD) has informed the city that a complaint has been filed accusing Dallas of violating the federal fair housing laws.

Two years ago a fire started in the laundry room at Carolina Chase Apartments at 5351 Peterson Lane near the Galleria, heavily damaging the structure. The owners decided to demolish and replace the burned two-story building with a five-story building.

Carolina Chase was built using low-income housing tax credit money, a form of federal financing that requires recipients to provide housing to low-income residents over a given period of years. The period of years is set out in a contract called a “land-use restriction agreement” or LURA. Tax credit projects also require local government approval.

According to the complaint, Carolina Chase was still within its LURA when it burned. If true, that would mean the owners are required to supply at least an equal number of low-income units in anything new they build on the site.

They also need City Hall’s help and imprimatur to apply for a new tax credit grant to finance the project. The developer’s complaint to HUD says: “District Councilman Lee Kleinman was supportive of Complainant’s plans until he learned that those plans included the leasing of units to low-income families, at which point he told complainants that they could build a low-income project but not at that location.”

If true, that certainly left the developers high and dry, not to say totally screwed. They had a federal contract requiring them to offer low-income units on the site, but local officials were telling them they couldn’t.

It’s exactly the kind of behavior alleged in the yearslong Lockey and MacKenzie litigation which accuses Dallas City Hall of carrying out a deliberate sub rosa policy of racial segregation while continuing to take home large amounts of federal dollars aimed at desegregation.

Kleinman says there is more to this scenario than meets the eye but he is constrained from getting into it publicly pending the city's response to the HUD notification.

But then there’s the other shoe. Last Oct. 31, under the headline, “Emails Show HUD Hot on the Trail of Missing Millions at City Hall,” I told you that the Justice Department in Washington was looking into the Dallas Housing Department and some important missing documents in the handling of $30 million in federal funds. I didn’t describe or characterize my sources in that piece beyond saying they were “reliable.” My sources were people inside City Hall who had been briefed on the matter and persons outside City Hall who had been questioned by federal investigators.

On Nov. 10, Robert Wilonsky had a piece in The Dallas Morning News in which he said he had spoken with HUD’s regional spokesperson in Fort Worth, Patricia Campbell, and that Campbell had assured him my version was all wet: Under the headline, “HUD tells Dallas it needs proof — pronto — that it properly spent $29.9M on affordable housing,” Wilonsky wrote: “She also added that for now, HUD's the only federal agency interested in the missing docs.”

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Just before the holiday, I received a copy of a letter (see below) from Campbell to Curtis Lockey, a principal in the Lockey and MacKenzie litigation, denying Lockey access to certain documents in the matter of the missing $29.9 million. Lockey had demanded the information under the Freedom of Information Act.

Campbell told Lockey HUD was denying him access to the documents under an exception to FOIA that allows an agency to withhold “records or information compiled for law enforcement purposes.” That exception, called “Exemption 7,” deals with the right to a fair trial and speaks directly of “a record or information compiled by a criminal law enforcement authority in the course of a criminal investigation.”

I wrote to Campbell immediately to tell her that her letter to Lockey looked to me like a possible “confirmation that an agency other than HUD is investigating the matter, thus contradicting what you told Wilonsky or what Wilonsky quoted you as telling him.”

She wrote back: "The only agency I can speak on behalf of is HUD, and only the FBI and the DOJ can confirm whether or not they are conducting investigations. Thus the response to Mr. Lockey’s FOIA pertains only to HUD, and not to any other agency. It does not confirm any other agency investigations."

The Office of Inspector General within HUD can carry out criminal investigations. The FBI never confirms or denies investigations. I just happen to know the FBI is out there making calls about the missing $29.9 million. Be that as it may.

There is a bottom line in this. For six years the official line at Dallas City Hall has been that Lockey and MacKenzie are a couple of sour grapes guys angry because their downtown tower redevelopment deal went south on them and they lost money. A comprehensive four-year federal investigation bore out virtually all of their claims, but Dallas escaped any meaningful consequences when Mayor Mike Rawlings cut a political deal with then newly appointed HUD secretary and former mayor of San Antonio Julian Castro.

The documents Lockey was seeking that HUD has declined to release are related to a new complaint Lockey has filed (see below) alleging that the $29.9 million is missing because Dallas continues to flout and violate federal housing law with impunity. His new complaint now may have sparked a new federal inquiry, but this one, unlike the last, may be criminal, not administrative.

If this were football, I’d say we’re just starting the third quarter, and the score so far is Lockey and MacKenzie 24, City of Dallas 13. But it’s not football. It’s real life. And real life can be very serious.


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